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Forecasting Quality Grade And Certified Angus Beef Premiums By Joe Parcel

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The data I chose to analyze is an article entitled, Forecasting Quality Grade and Certified Angus Beef Premiums, by Joe Parcel. This article analyzes the risk and uncertainty of forecasting the future prices of premiums in certified Angus beef grid pricing. Data was derived from the US department of Agriculture and the CME group spanning November2, 1996 through January 11, 2016. The data used in this article was weekly data determined by date with daily spot corn prices and live cattle and feeder cattle futures prices. The objectives of the study are to evaluate how accurate the forecasts of CAB-choice, prime-choice, and choice-select premiums within 5 months or whatever the length the cattle are on feed. This knowledge would be…show more content…
In class I used the empirical format in my project to determine the quantity of beef in the market. I used alphas before each substitute to be able to change the slope of the demand curve if needed. In this study, they used the empirical format and used corn, premium of each quality of meat, fat cattle, feeder cattle, and carcass weight as variables to create the equation. They also used functional format to determine quantity demanded. In class we discussed how this can determine changes in demand vs changes in quantity demand. We also stated that demand is a horizontal summation of individual demands. Which simply means many different demands form together to create one large demand trend line. Their equation is represented as: PGT = f(LN[QGT], POPULATIONT, GDPT, LN[T], MT). The variables included in this equation are the natural logarithm of lbs in the beef market, population, GDP, Logarithm of their time dummy variables, and logarithm of monthly dummy variables. In class we used simple variables such as income, tastes, price of subs, exports, etc. to find supply and demand for the product. The results of the first regression model were the least accurate in this study because it produced the lowest R-squared. It explained that the premium variability was most heavily caused by the choice-select spread in beef. This means that the greater the spread on those
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